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Could silver one day be worth more than gold?

By: Peter Cooper



-- Posted 9 July, 2011 | | Discuss This Article - Comments:

By: Peter Cooper, Arabian Money

Summer time is a chance for re-reading investment classics at ArabianMoney. We’ve just been dipping into the 2008 ‘Guide to Investing in Gold and Silver’ by Michael Maloney, and find that pretty much everything he predicted has come right.

If you bought silver when this book came out then you have probably doubled your money today, and briefly sat on a three-fold profit back in April this year. ArabianMoney is confident that April’s spike will be passed this autumn, so loading up on silver in the quiet summer months is our best tip right now (click here).

Silver, not gold

However, we were still struck by Mr. Maloney’s conclusion that the silver price will one day exceed that of gold. That is an absolutely extraordinary claim as striking now as it was three years ago.

But we can see a scenario that could get silver more highly valued than gold. It would require a hyperinflation of a kind not seen in the advanced economies since Germany in the early 1920s, or at the very least a long period of elevated monetary inflation.

At the moment gold is the currency of choice among precious metal investors but this could change, particularly if the kind of price momentum we saw from last autumn to this spring is repeated. Everybody loves to jump on a winning trade.

The thing is that physical silver is in very short supply, and the situation in the Comex futures market is one of artifical price suppression that teeters on the brink of a breakdown. How else could any commodity be priced at less than it was 30 years ago?

Physical shortage

So if the Comex price fixing is broken by overwhelming physical demand, and a momentum trade develops in a tighly supplied market then you do have the potential for an exponentially soaring silver price. Those presently stashing their insurance money in gold would therefore be tempted to switch part of it into silver, and so the price would go up and up.

Perhaps in that dynamic the price of gold might begin to weaken, or certainly not to rise at all. Silver could then in a super price spike shoot past the gold price. But this would be like the dot-com bubble of the late 90s and after a short time the speculative fever would burn out and the price collapse.

However, the point to note is that silver prices are low now with massive upside potential if the bull market in precious metals continues and the global economy does not fall into a deflationary depression.

Summer time is a chance for re-reading investment classics at ArabianMoney. We’ve just been dipping into the 2008 ‘Guide to Investing in Gold and Silver’ by Michael Maloney, and find that pretty much everything he predicted has come right.

If you bought silver when this book came out then you have probably doubled your money today, and briefly sat on a three-fold profit back in April this year. ArabianMoney is confident that April’s spike will be passed this autumn, so loading up on silver in the quiet summer months is our best tip right now (click here).

Silver, not gold

However, we were still struck by Mr. Maloney’s conclusion that the silver price will one day exceed that of gold. That is an absolutely extraordinary claim as striking now as it was three years ago.

But we can see a scenario that could get silver more highly valued than gold. It would require a hyperinflation of a kind not seen in the advanced economies since Germany in the early 1920s, or at the very least a long period of elevated monetary inflation.

At the moment gold is the currency of choice among precious metal investors but this could change, particularly if the kind of price momentum we saw from last autumn to this spring is repeated. Everybody loves to jump on a winning trade.

The thing is that physical silver is in very short supply, and the situation in the Comex futures market is one of artifical price suppression that teeters on the brink of a breakdown. How else could any commodity be priced at less than it was 30 years ago?

Physical shortage

So if the Comex price fixing is broken by overwhelming physical demand, and a momentum trade develops in a tighly supplied market then you do have the potential for an exponentially soaring silver price. Those presently stashing their insurance money in gold would therefore be tempted to switch part of it into silver, and so the price would go up and up.

Perhaps in that dynamic the price of gold might begin to weaken, or certainly not to rise at all. Silver could then in a super price spike shoot past the gold price. But this would be like the dot-com bubble of the late 90s and after a short time the speculative fever would burn out and the price collapse.

However, the point to note is that silver prices are low now with massive upside potential if the bull market in precious metals continues and the global economy does not fall into a deflationary depression.


About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link


-- Posted 9 July, 2011 | | Discuss This Article - Comments:



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